Time Warner Discussing Stake in Hulu

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Time Warner CEO Jeff Bewkes

Hulu is owned by Walt Disney, 21st Century Fox and Comcast and a cash infusion from Time Warner would help the company compete with Netflix and Amazon.com's streaming service.

Hulu is in discussions to sell a piece of itself to Time Warner in a deal that would value the streaming-media service at $5 billion, the Wall Street Journal reported on Thursday.

Hulu is owned by Walt Disney, 21st Century Fox and Comcast and a cash infusion from Time Warner would help the company compete with Netflix and Amazon.com's streaming service. The Journal says Time Warner is negotiating for a 25 percent stake in Hulu, which would mean the portion owned by the other conglomerates falls from one-third now to one-fourth if the transaction gets done.

If Time Warner invests in Hulu, it might be obligated to also supply it with content from Warner Bros. and Turner Broadcasting, which includes TNT, TBS and Cartoon Network. Time Warner also owns HBO, which has a digital service all its own for distributing its popular content online.

Two years ago, Hulu shopped itself for a sale but couldn't find a buyer, with insiders saying several interested parties were nervous that a new owner would lose content if Disney, Fox and Comcast were no longer stakeholders. After that, the three conglomerates vowed to invest an additional $750 million into the asset.

In 2015, about 59.9 million users will watch video on Hulu, according to eMarketer, most of them watching for free with ads attached. J.P. Morgan said in a research note two months ago that it expects Hulu to boast 16 million paying subscribers in the next couple of years, up from roughly 10 million now, and that by the end of 2016 Hulu could be worth as much as $8 billion.

Time Warner CEO Jeff Bewkes said on a recent conference call to discuss earnings that while he was interested in maximizing the value of content he wished to do so without licensing too quickly to subscription VOD services and further eroding traditional windows. It would seem, then, that an ownership stake in Hulu — followed by content-licensing deals between Time Warner and Hulu — would be a logical step in that direction.

"While it could cause some near-term pain for TW as it is likely the first-mover in the industry's prisoner's dilemma regarding multi-revenue-stream content monetization, it could be the right thing to do to salvage long-term advertising growth and pay TV subscriber levels," ISI Media analyst Vijay Jayant said after hearing Bewkes' comments.

Time Warner declined to comment.

Email: Paul.Bond@THR.com

 

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